Green Commitment a Far Dream for SA with Heavy Tax on EVs

The South African government’s initiation to reduce greenhouse gas (GHG) emissions by 34% by 2020 is likely to accelerate the market of Electric Vehicles (EVs) in the country.

The transport sector in South Africa (SA) is identified as one of the key sources of GHG emitters. And in the course to meet environmental obligations, EV presents a window of opportunity for both—the county and Original Equipment Manufacturers (OEMs).

From country’s perspective, EVs in South Africa will not just reduce oil imports, create jobs and save foreign exchange but also improve air quality and check or minimize the threat of climate change.

OEMs, on the other hand, can exploit the market opportunity exposed in the country. The numbers of EVs on South African roads were just over 500 of approximately 7 million cars last year. It means EVs market players can take the advantage of opportunity unlocked by the potential of EVs market which is merely in the startup phase of growth cycle.

The formation of Electric Vehicle Industry Association (EVIA) in SA is also anticipated to drive the market of EVs in near future. The EVIA aims to promote green transportation, boost the confidence of investors in the sector and support government to meet the commitments to lower emission.

Moreover, EVIA is also expected to work as a lobby group between EV industry and the government so that the market of EVs can prosper meeting country’s green commitment.

For instance, SA’s tax policy on EV discourages people from its purchase as aspirant EV owners are bound to pay 43% tax (25% import tax and 18% ad valorem). This is identified as one of the key hindrances behind the growth of EVs market in the country. The EV market players in this regard expect EVIA to negotiate strongly with the government and reduce or exempt such tax. This will encourage people towards EVs rather than fuel-powered cars which will ultimately benefit the environment to which the country is committed for.

Hence, to meet its green commitment, the country urgently requires favorable policy and incentives. This will accelerate the EVs adoption process in the country. As a result, SA is likely to combat the threat of climate change and also create favorable market for the EVs attracting more EVs manufacturers in the country.

Subarna Poudel is a researcher with Frost & Sullivan. He can be reached at subarna.poudel@frost.com

Sapan Agarwal drives content and marketing for Frost & Sullivan. Sapan is based out of Kuala Lumpur Malaysia and can be reached at sapan.agarwal@frost.com | +603 6204 5830